After the Hong Kong stock market on March 18, Tencent released its 2019 annual financial report. In 2019, Tencent's revenue was 377.289 billion, an increase of 21% year-on-year, and net profit was 93.31 billion, an increase of 19% year-on-year.

Tencent's revenue is divided into four parts, including value-added services, financial technology and corporate services, online advertising and others. In terms of the main three business data, value-added services business revenue reached 52.308 billion, an increase of 20%; financial technology and corporate service revenue reached 29.920 billion yuan, an increased of 39% year-on-year; online advertising business reached 20.225 billion yuan, an increased of 19% year-on-year.

Tencent Cloud steadily develops cloud services

The financial report pointed out that the growth of financial technology and enterprise service revenue was mainly due to the growth of commercial payment revenue and the growth of cloud service revenue. Cloud computing business is included in the financial technology and enterprise service sub-items.

"In 2019, our cloud service revenue exceeded 17 billion yuan, and the growth rate continued to exceed the market. Benefiting from the continuous optimization of the sales team and the deepening of our cooperation with service providers, the number of paying customers exceeded 1 million." Tencent written in the financial report.

As a comparison, Tencent Cloud's revenue reached 9.1 billion, exceeding 100% in fiscal 2018. According to Tencent's 2019 Q3 financial report, Tencent Cloud's third-quarter revenue was 4.7 billion yuan, a year-on-year increase of 80%, and a single quarter exceeded 50% of the whole year of 2018. The growth momentum in the latter period did not decrease.

86.8%, Tencent did not directly indicate it in the 2019 financial report, but it is not difficult to calculate the year-on-year growth rate of Tencent Cloud, which is also stable in the growth rate of the head manufacturers.

In September 2018, Tencent carried out the third strategic upgrade in its history. It established the "Cloud and Smart Industry Business Group" (CSIG) and integrated the teams, businesses and capabilities of To B from various business groups of Tencent, which fully embraced the industry on the Internet. At the same time, CSIG has become the external window of Tencent's To B strategy.

It is also in the following fiscal year of 2019 that fintech and corporate services appear in the category of Tencent's financial reports. It has been classified into other businesses before, which also means that fintech and corporate services have been strengthened and become Tencent's future main channel, especially Cloud service and the smart industry it supports.

Relatively speaking, this is a year when Tencent Cloud is playing hard, and it is also the first complete fiscal year industrial Internet report card issued by Tencent since the "930 Revolution". Tencent did not even write growth data in its financial report. Compared with 2018, Tencent Cloud's market share has been enough to rank in the top two in China, and it is notorious that there is no need for Tencent to emphasize its cloud business in the financial reports.

On February 11, 2020, IDC released the "Tracking of China's Public Cloud Service Market (2019Q3)" report. The scale of the Chinese public cloud IaaS market in Q3 2019 reached 14.46 billion yuan, an increase of 62.2% year-on-year. Alibaba Cloud, Tencent Cloud and Ksyun are the top three enterprises of Internet cloud service providers. Among them, Tencent Cloud benefited from maintaining a high penetration rate in the gaming and video industries, which can increase the use of customers and expanded the customer base from the education, finance, and retail industries. What’s more, it can further expand its comprehensive operating income.

How to further shorten the gap with Alibaba Cloud

Tencent Cloud has reached a new level, and it is also facing new challenges brought by the market and industry. How to further shorten the gap with Alibaba Cloud and even rank further in the global cloud vendors is what Tencent Cloud needs to focus on in the next one or two years. 

It is a good data to increase from 9.1 billion yuan to 17 billion yuan in a year. In the same revenue period of the head manufacturers, Tencent may be second only to Alibaba Cloud in China. The market has slowed down compared with the previous two years, Matthew Effect has intensified the competition, but generally, Tencent Cloud's C2B strategy is successful at this stage.

Next, Tencent Cloud has to face the common problems of China's Internet cloud computing manufacturers. The Internet industry still occupies half of the public cloud market, but the growth rate has slowed down. It has become a trend for major cloud service providers to demand revenue from non-Internet industries, especially in the fields of government, finance and manufacturing.

We also found that Tencent has made some measures to deal it. In its financial report, Tencent emphasized the importance of optimizing the supply chain and expanding its business scale. Meanwhile, its gross profit margin has improved. It continues to expand its businesses in vertical fields such as Internet services, tourism, living services and industry, which can take advantage of connecting consumers to help companies upgrade digitally.

"C2B is an important starting point for the industrial Internet and a unique advantage of Tencent." In October 2019, Tang Daosheng, senior executive vice president of Tencent and president of the cloud and smart industry business group, said.

"In the past year, Tencent strengthened Tencent Cloud's platform capabilities, concentrated the company's technical strength in the fields of security, AI, LBS, blockchain, etc., and integrated medical, travel, education and other industrial platforms to help public service institutions and traditional enterprises achieve transformation and upgrading. At the same time, Tencent also leverages To C's capabilities and experience to help B-end partners better serve users through connectors such as WeChat official accounts, mini programs, payments, and WeChat Work. It hopes to use Tencent's C2B capabilities to become a good digital assistant.

Especially in the field of government, 2019 is the breakthrough year of Tencent's government cloud. Tencent uses C-end resources and capabilities to help the government achieve digitalization. In 2019, it covers 28 provinces, 1 overseas, 151 projects, and a contract value of 2.6 billion. The health code during the epidemic became a highlight. As of March 16, 2020, the cumulative health code of Tencent's epidemic prevention code exceeded 2.5 billion, covering 900 million people and accumulating 8 billion visits.

2020 will be the year of deepening Tencent Cloud's C2B strategy. C2B is Tencent's natural advantage, and it may also bring limitations to Tencent Cloud. How Tencent Cloud will further use its advantage is worth looking forward to.

In other respects, Tencent announced that it has achieved a "Double Hundred" milestone in which the total number of servers on the entire network exceeded 1 million and the peak bandwidth exceeded 100T in 2019. Tencent became the first company in China and the fifth in the world with a server total of more than one million, and also the first company in China with a peak bandwidth of 100T.

The financial report also specifically pointed out the capabilities provided by Tencent during the epidemic. These are either Tencent's original business layout or the temporary launch of the service in response to the needs of the epidemic, with the prospect of commercialization in the future. For example, within two months after the launch of Tencent Conference in late December 2019, the number of daily active accounts exceeded 10 million, making it the most used video conferencing application in China. At the same time, the Tencent meeting further deepened the communication between WeChat and WeChat Work, assisted companies in customer management and sales conversion, and millions of companies successfully resumed office through WeChat Work during the epidemic.

In terms of medical care, Tencent Health has become an important channel for more than 300 million WeChat users to obtain real-time epidemic data, online consultation and AI self-diagnosis. It provides AI medical imaging technology to assist in the diagnosis of new coronaviruses. And reliable and professional medical information are also provided by Tencent Pharmacopoeia. Meanwhile, it also provides some epidemic-related content through multiple high-traffic platforms such as WeChat and Tencent News, with more than 600 million visits. 

This is an article from WeChat official accounts Leifengwang (ID: leiphone-sz), written by Zhang Shuai, translated by Chris Yuan.